Wednesday, June 24, 2009

Hog wild

There are some indications that blame for the swine-flu outbreak should be assigned in large part to factory farms, where the virus spread and mutated. But why do factory farms exist in the first place? The answer, according to Stephen Smith of Splice Today, is agriculture subsidies:
In 2007, researchers Elanor Starmer and Timothy Wise of Tufts published a paper arguing that farm subsidies for corn and soybeans doled out by the federal government are responsible for, among other things, the explosion in factory farming of pigs. Hog farming, unlike other livestock industries, was not dominated in the U.S. by consolidated factory farms until relatively recently. Farmers used to rely on the cost advantages of being small and diversified; they could feed the pigs corn grown cheaply on their own farm, as well as the husks and other things that only a pig would eat, and in turn use the pig's waste as fertilizer. There was (and still is) little to no added efficiency in raising 20,000 hogs as opposed to 2000.

This has changed in the last few decades, as crop subsidies drive the retail price of livestock feed far below the cost faced by farmers producing it themselves. Farmers would lose money if they raised hogs on their own corn, and so small, diversified operations have all but ceased to exist. Starmer and Wise analyzed the distortion caused by a farm policy reform bill passed in 1996 known as the FAIR Act, and found that it dramatically increased subsidies for corn and soybeans, leaving the hog farming industry almost entirely in the hands of a few large factory-farming firms.
A few points about subsidies:
  • Subsidies promote the production of goods that otherwise wouldn't occur. In a free market environment there is usually a good reason for why that production is not taking place, typically because that good isn't being demanded.
  • Like most government programs, subsidies are very hard to repeal once enacted. Mohair subsidies were begun in 1954 to ensure an adequate supply of material to make uniforms for the army. Five years later the Pentagon removed mohair from its list of strategically critical materials due to the emergence of synthetic fibers. The mohair subsidy wasn't ended until 1994, and even then attempts have been made to bring the subsidies back. 
  • While agricultural subsidies are often justified in the name of preserving small, family-owned farms the reality is that recipients tend to be large agribusinesses. Government money being directed to the well-connected is not an unusual phenomenon.
  • Agriculture subsidies tend to have knock-on effects extending beyond the good that is being subsidized. One of the biggest recipients of agriculture subsidies is corn, with the result that far more of it is produced than would otherwise be the case. Because so much of it is available the price is pushed down which means that it is more widely used, which partly explains for example (along with import quotas) on why Coca-Cola uses high-fructose corn syrup (with some possible deleterious health effects) in the U.S. and sugar and bottling plants in the rest of the world.
  • By pushing down prices subsidies also serve to harm farmers in less developed countries, where the agriculture sector tends to be more prominent and employ more workers.
  • It is not at all obvious that subsidies are necessary to support a robust and competitive agriculture sector. Since farm subsidies were ended in New Zealand the country has experienced both higher outcomes and boosted output in its dairy sector. Australia has some of the world's lowest subsidies but is nonetheless a major agricultural exporter.
  • The continued existence of subsidies is best explained as a tribute to effective lobbying by agriculture interests than policy designed to benefit the majority of Americans.

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